February 2012 Archives

A colleague interviewed John Harris, chairman of IT user group The Corporate IT Forum and chief architect and vice president of global IT strategy at GlaxoSmithKline, recently and got his views of the UK skills shortage.

He, like many others, is of the opinion that years of outsourcing commodity IT skills is contributing to a lack of grass-roots IT talent today, because the talent pipeline is not being fed at the bottom end.

"While outsourcing did bring value, people moved jobs that should not have been moved. We outsourced our skills pipeline," he said. Young people were not being given a chance to come into the industry.

"Yes, it may be more economical to outsource to India, but such a job may be the type of work that gives an apprentice a real grounding [in IT]," he said.

There has been loads in the press lately about the IT skills gap and genuine attempts to address the shortage of IT students that are capable of breaking into the corporate IT sector.

Outsourcing service providers themselves are getting involved in a Ministry of Justice and Business in the Community backed the project which aims to help students further their careers in IT. Nine of the biggest UK IT service providers have agreed to a charter for employing IT apprentices. These are Accenture, Atos, Capgemini, CSC, Fujitsu, HP, Logica, Siemens and Steria have all signed up to the charter.

Azim Premji, chairman at Indian IT outsourcing firm, has even offered to take UK students to India for 12 months to be trained up in software, IT and engineering.

In the Wipro programme students would receive three months classroom based training and nine months work based training.

The idea emerged when Premji met Prime Minister David Cameron when he travelled to India in 2010. Premji told the Telegraph newspaper that he and Cameron had talked about education and in particular the shortcomings of IT and engineering education.

Kevin Streater, executive director for IT and telecoms at the Open University, says IT teaching should be geared towards what the industry needs. For example competence in service management, cloud computing and big data requires a good foundation in computer science.

I haven't written much recently about the unpopularity of offshoring amongst IT professionals in the UK. Businesses using lower cost workers from offshore locations such as India is not popular. Political parties can see this and use it as to try and win votes.

Before the last UK general election the Tories played the immigration card. The Tories promised a cap on immigration. When they got into power they capped immigration and raised the pay threshold on intra-company transfers (ICTs). ICTs are used to bypass the need for visas and account for a massive proportion of offshore IT workers in the UK.

I was reading an article on an Indian website, The Economic Times, about US president Obama's proposed tax on foreign earnings. This is aimed at discouraging large firms to ship jobs offshore. The plan would also incentivise firms to bring work back to the US. Here is the article.

This is not a surprise given that it is election year in the US and Obama has a fight on his hands, despite the chronically under qualified opposition. There is high unemployment in the US.

The Tories used it as a tool to win votes and introduced a cap and although not capping ICTs they did change the rules to try and limit its use as an immigration loophole.

I was contacted by EDSers in the US and the UK in the months after the take-over. They were not a happy bunch.

As a result of staff being laid off, leaving on their own accord or just being unhappy, many felt that HP would suffer as a result.

One thing seems clear and that is the fact that lots of former EDS staff are now working for other companies in the sector. Every event I seem to go to I bump into someone who was at EDS but is now working for one of its former competitors.

So the break-up of a company like EDS has probably done the wider industry some good by spreading talent and experience. Especially with non-specialist services companies like Dell and HP trying to emulate IBM Global Services.

So do you think the exodus at EDS helped the competition? And how well is HP doing in the services sector without the staff that left?

The upcoming research from KPMG in the form of the former Equaterra study of service provider performances in the UK might shed some light on it. I am expecting to be able to shed light on the results of this comprehensive report soon.

So the government's App Store is here. 1700 services from 258 suppliers at the push of a button.

The government has launched its CloudStore. This is its version of the App Store which will give public sector organisations access to approved cloud-based applications at the touch of a button.Read more about it here.

So from next month, when the services are approved, public sector bodies will not only be able to take advantage of the lower cost of cloud services but they will also have a choice.Services will be available in four categories: infrastructure, platform and software as a service, plus consultancy services.

The question is, how will this impact the big system integrators that do most business in government?

Lee couldn't talk about the specific deals for obvious reasons but he said it could be becoming a trend.

The advantage to the business that owns the captive is the capital that it gets from the sale as well as service improvements as the supplier invests in improving processes. The cost of service could reduce if the supplier provides services to other customers through the former captive.

Professor Ilan Oshri from Loughborough School of Business, says businesses will always sell captives on after a few years because they start to lose their advantages. He says recent months have seen a few examples of divestments.

According to Oshri divesting captives enables them to expand to become more effective and bring costs down.

"They cannot keep investing and getting growth because they do not have the global footprint to tap into new markets. They can sell it to a supplier with a good brand name which can do a better job with the captive. The business will benefit from the methodologies and delivery systems that the supplier introduces. And costs will come down.

It looks like KPMG's sourcing operation is facing a legal challenge in Sweden. The report below describes how manufacturing firm Husqvarna is claiming it has had bad advice and is suing for 18 million kronor (£1.7m)

The article in Swedish is below but before that is a Google translation into English. I am trying to find out more but I am having some language problems. If anyone knows more details please let me know.

Google Translation:

The company Husqvarna calls in a lawsuit 18
million of consulting firm KPMG Sourcing. This is because Husqvarna says
that they have been duped by an advisory mission. In a lawsuit now
requires Husqvarna to KPMG Sourcing repay his fee of 18 million dollars.
2009 began an investigation of Husqvarna's computer system which then
was outdated and expensive. They appointed as KPMG, which would reduce
costs by 200 million over five years after a so-called outsourcing of IT
functions. According to Husqvarna, the company has made major errors in
his advice on an analysis of Husqvarna's computer system. According to
the lawsuit dealt with a number of figures wrong and in fact turned out
the decision would entail a cost.

For example over the next two years 100% of businesses will prioritise IT investments in facility energy management and energy and carbon management. Meanwhile, 87% have budget initiatives for smart meters and sustainable datacentres.

The report, which also analysed 17 service providers, spelled out the capabilities of each.Here is what it had to say about some of them.

It said Accenture, Deloitte, IBM and Logica are leading the way, with practices dedicated to energy and sustainability services. "They each have a broad portfolio of offerings covering most market segments, strong sustainability consulting skills to engage clients in new discussions, and active marketing of corporate sustainability performance."

It also revealed that Capgemini, CSC, Fujitsu, Steria and TCS have broadened offerings. "Based on success in one or two market segments, these five IT systems integrators are expanding their propositions into contiguous areas," said the report.

Verdantix said HP, IBM, Wipro and Orange score highly on corporate sustainability. "Reflecting their manufacturing roots, HP and IBM together lead the field in terms of corporate sustainability performance. These firms also achieve the highest brand recognition among buyers for their sustainability offerings. Among the pure-play IT services firms, Wipro achieves the highest score for its corporate achievements on sustainability metrics."

But is your employer investing in services to help it better manage energy consumption?

There are often claims that despite thousands of IT professionals being out of work there is a skills shortage in the UK. This is often the excuse used by suppliers and their customers when roles are offshored to countries like India.

I wrote a story this morning about nine IT service providers agreeing to sign up to a charter which requires them to agree to meet certain principles.

Good to see IT service providers taking the initiative in trying to get more IT students ready for the workplace.

This is backed by the Ministry of Justice and private charity Business in the Community but has been pushed through by the suppliers themselves. Accenture, Atos, Capgemini, CSC, Fujitsu, HP, Logica, Siemens and Steria are the nine participants so far.

It is an attempt to bridge the gap between education and the workplace. Is it just scoring brownie points or will this create more UK IT jobs? Given the track records of many of these suppliers it appears they favour offshore staff. However it would seem rather strange if the service providers trained thousands of UK IT students and then offshored all the work they were trained for.

From a less skeptical viewpoint it will address the perceived lack of job-ready IT graduates.Indian IT giant Wipro recently said it could give UK IT students training to close this perceived shortcoming.

I haven't done this for a while but here is another contribution to my blog series asking experts why they thing large IT projects fail.

The entry below is the 28th so far. It comes from Bill Curtis is chief scientist at software quality firm CAST. He is best known for leading development of the
Capability Maturity Model (CMM) which has become the global standard
for evaluating the capability of software development organisations.
Prior to joining CAST Bill worked at SEI, MCC, GE Space Division and the
University of Washington.

"Most of the good answers on failure have already been taken by the folks interviewed before me. Let me add an interesting subscript. Some years ago I was involved in one of the largest successful failures of all time. The product worked as advertised and had begun winning competitions. However the company was unable to make a profit and ultimately was forced to sell the business to a competitor. How can success lead to failure?

The successful debacle started with grandiose requirements, a vision of the future that went far beyond anything customers were requiring in their bids. The grandiose hardware architecture required in order to support these requirements was not grandiose enough to support the grandiose software needed to implement the grandiose functionality.

Bear in mind this was quite some time ago when memories and processors actually had real limits. The folks involved were certainly smart enough to manage this problem once it was identified. The only problem was that it wasn't identified until too late because no one was measuring the code. When we hit the integration test you could watch code flow over the edges of the chip and on to the floor. This should have been detected far in advance, but no one was measuring and analysing code size or quality.

The vast team immediately launched into an emergency re-architecting effort to re-cram code on to the available set of chips by radically slicing and redistributing functionality that was part of the grandiose vision, but not the customer's requirements.

The effort was successful and the system won the first customer's competition. However, the architecture was now such a patchwork that adapting it to the requirements of each new customer was an expensive nightmare. So expensive that it surpassed any profit we could make on the sale. We kept winning customers and losing money, leading to the eventual sell-off of the whole mess. The lesson was that there are all sorts of risks in system development - grandiose requirements, ridiculous schedules, inexperienced staff, etc. The only way to detect that a project is headed for failure early enough to change course or cancel it before too much money is lost is to continually measure the project and the product. Failure to measure isn't necessarily the primary reason that projects fail, but it is a reason that the failure costs so much more than it should have."

My mobile contract is up for renewal. So I thought I would contact my provider and try and get a better deal. After 10 years with the supplier and currently paying too much per month, in my opinion, I thought I would get a good offer.

Anyway I must complement the supplier's use of instant messaging to talk to customers. It worked really well. They knew who I was so had all the information at hand and I was able to take my time to give them the information they required. It allowed me to spend a few minutes to think about my answers. It was far less painful than a long telephone conversation but unlike email it was real-time.

I write a lot about the use of technology in contact centers but it is good to have a positive experience as a customer. Shame I couldn't get the deal I wanted but it wasn't a painful experience trying.

The full interaction is below with names changed:

Welcome to (supplier name). Someone will be with you soon.

You're through to Agent.

Agent: Hi I'm (supplier name) - Agent. How can I help?

Karl Flinders: My contract is up at the start of next month. I currently pay £35 per month. I want to bring this down to £20. If I stay with supplier what are the phones and contracts I could switch to?

Agent: I'll be happy to help you.

Agent: Please can you tell me the 3rd and 4th character of the answer to your security question?

Karl Flinders: ******************

Agent: Thanks for the information. Please give me a few minutes while I check this for you.

Agent: I see that you can upgrade your contract now.

Agent: Would you like to do the same?

Karl Flinders: I am thinking about leaving because £35 is too expensive. I want to pay £20 per month.

Agent: Please stay connected, while I transfer the chat to the concerned department and they'll help you with your concern. (help we are losing a customer)

We're putting you through to the right person, won't be long.You're through to Agent.

Agent: One moment please while I get your account details.

Agent: Thanks for waiting. I can have a look at that for you.

Agent: Do you've any phone in mind?

Karl Flinders: iPhone

Agent: May I ask which model of an iPhone?

Karl Flinders: What's the best you can offer

Agent: I'll see what best we've for you. May I ask what you've been offered with another provider?

Karl Flinders: 300 minutes is the minimum and £25 per month is the maximum

Agent: Looks like the best I could do is £25.00 per month for first 18 months (with £2.00 line rental discount for 18 months) and after that £27.00 per month.

Agent: You can lower your tariff down once in the contract and you can do this half way through your contract term.

Agent: One off cost for the handset will go up by £99.99.

Agent: I mean an iPhone 4 8 GB*

Agent: Along with this deal, I'll also give you an option to choose any one of the free and unlimited Bolt Ons- Unlimited supplier to supplier calls, unlimited landline calls, unlimited weekend calls or extra 200 minutes.

Karl Flinders: What if I go iPhone 3Gs?

Agent: I'm just checking it for you.

Agent: Thanks for waiting. Looks like iPhone 3Gs is free with £27.00 per month, but I cannot reduce the monthly line rental.

Agent: I'd suggest you an iPhone 4 8GB deal as it works out cheaper and tailored to your need.

Karl Flinders: but there are enough minutes

Karl Flinders: not enough minutes that should have said

Agent: Your average use is 130 minutes. If you keep an eye on your allowance, I'm sure you could get away with 200 minutes.

Agent: I still give you an option to choose any one of the free and unlimited Bolt Ons- Unlimited supplier to supplier calls, unlimited landline calls, unlimited weekend calls or extra 200 minutes.

Karl Flinders: It is too risky - I would need 300. I don't want to pay more than £25 per month. Do I have to select the bolt-on each month or can I select the 200 extra minutes for the entire contract in one go?

"[T]here are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns - there are things we do not know we don't know."

He might have been talking about the alleged link between Iraq and the supply of weapons of mass destruction to terrorist groups in 2002, but Donald Rumsfeld , the then United States Secretary of Defense, could have been talking about the UK government's plans for the introduction of government/worker/private-sector mutuals to run government department back offices and other things.

They will involve the government setting up joint ventures with private businesses and employees to run things like pension administration in government departments.

I went to a presentation this morning about how these mutual will be used in the public sector and how they might be used in the private sector. It was a good presentation, packed with outsourcing suppliers and end user businesses.

The event was held at the offices of law firm Berwin Leighton Paisner and was hosted by its outsourcing head Mark Lewis. Outsourcing industry veteran Robert Morgan, who works for sourcing consultancy Burnt-Oak Partners gave the talk, which was more of an open debate.

It was good to listen to quite a lively debate on the subject. So much is as yet uncertain about how these mutual will work so this type of debate needs to happen to prepare customers and suppliers for the introduction of mutual style organisations.

For example the first of these, currently being set up, is the My Civil Service Pension (MYCSP). It will administer 1.5 million civil servant pensions, and will be owned by three groups: the 475 staff, the government and a private company that will run the service.Next month the government is expected to announce the private sector supplier that will be involved.

Speaking at The Crown and suppliers: A new way of working, a government procurement conference in London, Katharine Davidson, director of strategy in the Cabinet Office Efficiency and Reform Group (ERG), said the My Civil service Pension (MyCSP) mutual currently being set up will be the first example of a new way the government will work with suppliers. "Everything is up for grabs and the pie is bigger," she told an audience of 800 representatives from suppliers.

The government's rationale is that mutual are a better option to many outsourcing agreements because the success of the organisation is in the interest of all the stakeholders: taxpayers, staff and the private sector partner.

Many refer to this as the John Lewis style model of employee ownership.

The advantages seem to be the fact that a private supplier can bring with it investment funds to help it set up state of the art IT for example and introduce good business processes. The tax payers will receive a better service without their money being wasted. Meanwhile the staff will work really hard because they own the organisation.

Well that's very roughly how it is supposed to work. When I started writing about it I could tell it was complicated but the more I speak to people the more complicated it gets. This is largely because there are a lot of unknowns (hence my intro). The government has not gone into much detail.

There are lots of different models already in the public and private sector which are similar to what the mutuals might offer.

One thing is certain the government wants to push ahead with plans to do this. Whether it is just a way to privatise on the sly, or a genuine attempt to improve services at lower cost to taxpayers, the private sector could follow this example.

Clearwater Corporate Finance, which specialises in technology mergers and acquisitions and investments, set up the Cloudaq website to enable investors to split the IT sector up and enable them to see the vale specialist cloud suppliers are building. It provides a comparison between the growth of cloud companies with Nasdaq and Techmark growth.

The website will also help IT providers check out how some of the listed cloud suppliers are doing. If you are going to move your IT into the cloud you have to be sure that the company you are doing it with is stable. You don't want to transfer everything and then see the supplier run into trouble.

The Cloudaq website should help build confidence in cloud computing. Well that's if they continue to grow at a faster rate than traditional suppliers.

It seems government departments are about to start buying cloud based services. Could this be the moment that changes the fortunes of IT suppliers in the public sector?

It promises to give lots of new suppliers an opportunity and with the government expecting a significant cost savings there will undoubtedly be incumbents that lose out to new players.

Speaking at the Government ICT 2012 conference, Chris Chant who heads up the G-Cloud programme, said some like-for-like services on the Cabinet Office's soon-to-be-announced G-Cloud framework were coming in at 10% of what departments were previously paying.

He said he expected departments to be buying and using cloud services from mid to late February. "My expectation is that from Easter the second iteration of the framework will be out. This time it will enable us to add new suppliers on a monthly basis," he said. "That really for me sets the scene for things: we'll have a living framework and dynamic procurement," he added.

Chant, who heads up the G-Cloud, wrote in a blog post in January that he was amazed at the pricing levels. "For instance, even the best departments that I've looked at seem to pay around £700-£1,000 per month per server in an IL3 environment, with the average around £1,500; G-Cloud prices are coming in 25-50% of that price depending on the capabilities needed."

In the blog post, which you can see here, Chant described how it is unacceptable that some large government departments spend 80% of their IT budgets with half a dozen suppliers.

He said: "CIOs across government today generally buy their IT from a single supplier. Even those who seemingly have a choice, with two suppliers or more contracted to them, can, in reality, only buy certain things from each supplier rather than everything from any of them. This uncompetitive and, in today's world, absurd situation is a legacy of the 1990s when government first began to outsource its technology and chose from a small list of suppliers who could afford to both bid and finance the deals. Ten years ago, the Inland Revenue's annual IT spend was over £250m; with HM Customs included, today's spend at HMRC is over £700m. Almost by accident, this strategy resulted in a few suppliers having almost all of the market - at one point, one supplier alone had perhaps 40% of the total government IT spend; now, some 80% is concentrated in a half dozen suppliers. That is now unacceptable."

What will the big systems integrators do?

We are already seeing this shift in the private sector. For example Capgemini's deal with the post office is a good example. Through Capgemini's Infostructure Transformation Services (ITS) the Post Office will have a single point of contact for all cloud services. See this story I wrote about it.

What do you think? Will be bad for the SI's who are all over government contracts? Which suppliers will benefit? Tell me what you think?